When I first decided to write this article, I had it all planned out in my head. The best way. The worst way. The best times. The worst times. The best tools. (Hmmmm…)
How to bill their clients is a question every freelancer asks when they’re first getting started. I thought I had it in the bag!
Then, when I actually sat down to write, I realized that the REAL answer is…it depends. No, I’m not being deliberately vague here. The type of freelancing you do, the type of clients you take on and the space of time it takes to complete a project are the guidelines for how freelancers should invoice their clients. There is no umbrella way to do it, and everyone’s needs are going to be just a little bit different.
So, instead of offering a blanket solution to a very specific problem, I’m going to put forth some of the different methods freelancers are using to invoice their clientele and what situations they seem to work well for. From there, it’s up to you to figure out what solution is right for you and your business.
Flat Price Invoicing
Flat price invoicing is by far the easiest way to handle freelance projects. There’s no haggling, no agonizing over hours or word count. You do the job, you get paid.
There are some things you need to consider before contracting for a flat price project, however. Are you being fairly compensated for your time? Is the project scope clearly defined? Have you accounted for the time required to do any research or preparation as well as the actual hands-on work? Is there a clause for what happens if the client is dissatisfied?
Do you require a down payment? How long does the client have to pay after you’ve submitted an invoice? What is the consequence if you have delivered the project, but payment has not been made?
All of these are very important points to cover before committing to a flat rate project. Having worked with a large number of freelancers over the years, I can tell them that most of them that work at a flat right require a down payment, and retain full rights and ownership of their work (intellectual or otherwise) until payment is made in full. They typically either clearly define a number of hours they will work on a project, or the number of “redos” they will do before the client has to start paying for their additional time.
Flat price is easy, but it’s also an easy way to be taken advantage of. Be sure you have all the pieces in place before signing on the dotted line.
By the Hour
This is far more common when you’re talking about things like software development, physical labor, or anything that has the potential to stretch over a period of time. As a matter of fact, many freelance job sites require contractors to document their work by the hour, and they’re paid accordingly. This way, if the project you thought would take an hour ends up taking ten, or the client changes the scope midway through, you’re paid for your time.
As with flat price invoicing, we strongly recommend you lay out the terms of the agreement at the beginning. When is payment due? Will it be due in installments (my personal recommendation if you expect a project to take more than 30-40 hours) or in a lump sum at the end? Who tracks how many hours you worked?
Are meetings included in billable hours? If something doesn’t work as intended, will you bill for the fix or will you fix it for free? If you’re fixing it for free, how long after the project is complete does the client have to let you know there’s a problem? At what point is that agreement voided? (This is REALLY important for engineering or software development, since clients often muck up the work by installing parts or incompatible plug-ins, then want you to fix it. At that point, it needs to become a new project, and those should be billable hours.)
This is my personal favorite in terms of freelancer security, especially when you’re talking about a large or long-term project. When you bill per milestone, you and the client agree that a certain sum will be paid when you’ve reached a specific part of the project. If the client doesn’t pay, work is halted until the deposit is made.
This leaves the least amount of wiggle room and provides the greatest amount of security for both parties. As before, however, discussions regarding price should include the scope of any changes that need to be made at a particular milestone.
Regardless of which type of invoicing method you decide to use, I STRONGLY recommend using an invoicing software…and that’s not just because invoicing software is what we do around here. Working with multiple clients on multiple jobs can get confusing fast, and it doesn’t take long to lose track of who’s been billed for what, who’s paid and whose account is still outstanding.
Invoicing software like MinterApp takes the guesswork out of the billing process, and it can be adapted to any of the methods above. By keeping all of your information in one place, it has the added benefit of making life VERY easy when tax time rolls around!